Budget 2022: Govt, RBI must ensure timely implementation of account aggregator framework by banks, says Ficci

NEW DELHI: The Federation of Indian Chambers of Commerce and Industry’s (Ficci) fintech committee has urged the Centre to ensure timely adoption and implementation of the account aggregator (AA) framework by banks.
In its pre-budget recommendations, the industry body said that to make the AA framework a success a strong push from both government and the Reserve Bank of India (RBI) will go a long way in implementing a faster and orderly launch of the initiative.
“To make the AA framework a complete success, all banks in the country must join in a timely manner. Hence, industry submits that a strong push from the government and RBI for time bound production launch of all the banks. This would go a long way in implementing and operationalising a faster and orderly launch of the AA framework, which is the
need of the hour,” it said.
What is AA framework
The AA framework is a financial data-sharing system that could revolutionise investing and credit, giving millions of consumers greater access and control over their financial records.
It can also help in expanding the potential pool of customers for lenders and fintech companies.
Account Aggregator empowers the individual with control over their personal financial data, which otherwise remains in silos.
The banks just need to join the AA network.
To simply put, it is a type of RBI regulated entity (with NBFC-AA licence) that helps an individual to securely and digitally access and share information from one financial institution they have an account with to any other regulated financial institution in the AA network. Data cannot be shared without the consent of the individual.
How will it improve banking system
According to an earlier release by the ministry of finance, the AA framework will make banking services hassle free for consumers.
It will do away with processes like sharing physical signed and scanned copies of bank statements, running around to notarise or stamp documents, or having to share your personal username and password to give your financial history to a third party.
The AA network will replace all these with a simple, mobile-based, simple and safe digital data access and sharing process. This will create opportunities for new kinds of services, like new types of loans.
Has any bank adopted the framework yet
Eight banks have already joined the system and are sharing data based on consent –Axis, ICICI, HDFC, and IndusInd Bank, State Bank of India, Kotak Mahindra Bank, IDFC First Bank, and Federal Bank.
These banks have joined the ecosystem as financial information providers (FIPs) and financial information users (FIUs).
A few non-bank finance companies (NBFCs) have also joined the ecosystem.
As of September 30, 2021, over 20,000 unique accounts were linked and 40,000 consent requests were raised.
What Ficci suggests:
The industry body recommends a few steps to increase scale in the ecosystem. These include:
1) Support from RBI
Ficci said that the support from the central bank is crucial to nudge its regulated entities.
* Urge PSUs who dominate the CASA base in India to participate as FIPs and FIUs in a time-bound manner.
* Ensure cooperative and regional banks’ participate to allow their customers broader choice.
2) Cross-regulatory cooperation to enable GSTN to become a FIP, enabling cash flow-based lending to MSMEs.
3) Enact the Privacy and Data Protection Bill as a law to provide legal base to protect a principal’s interests and hold data fiduciaries accountable.
4) Sebi and Irdai may issue directions to its registered entities to participate in AA framework, thereby making it the single source of truth for a data principal’s financial data.
Promote use of central KYC
The Ficci committee further recommends that central KYC registry API level checks should be considered as “full KYC” by banks and NBFCs in a completely digital manner, without having to go for face-to-face verifications.
A one time password (OPT) sent to the registered mobile number of the said individual (as available in the CKYC records) can be carried out so as to mitigate any residual risks.
Since the mobile number would have been captured and already verified by a bank/regulated entity before uploading on
the CKYC portal, it may be safe to rely on such information for further checks.
Tax incentives for startups
Ficci recommends extending the tax holiday of startups by 2 more years to those whose benefits would expire in the same period.
It further suggests that all start-ups registered with department promotion of industry and internal trade (DPIIT) should automatically get tax exemption rather than going through the current process of inter-ministerial board approval.
It also recommends extending special ESOP tax treatment for registered start ups to larger groups of companies like MSMEs.
Separate deduction for term insurance
The budget should introduce a separate section for term insurance policies, instead of having it in overcrowded section 80C, Ficci’s fintech committee said.
“This will incentivise consumers to buy term insurance policies and thereby, get adequate life cover for their families’ future,” it added.